On Friday, we looked at a monthly chart of Johnson & Johnson noting the stock has been on a bullish run since November.
Today’s Chart of the Day is a Keltner Channel chart for BMC Stock Holdings, Inc. (NYSE: BMCH).
BMC Stock Holdings, Inc. distributes lumber and building materials to new construction, and repair and remodeling contractors in the United States.
Now, the Keltner Channels serve as an overbought/oversold indicator. When the daily stock price is trading above the upper Channel, it signals that the stock is overbought.
There are always price retracements during a stock’s price uptrend — we know they do not advance in a straight line.
When a stock becomes overbought, it normally declines in price as the inevitable profit taking occurs.
Below is a daily price chart for BMC Stock Holdings, Inc. along with the three Keltner Channels (Upper, Middle, and Lower). </p
The BMCH daily price chart shows that BMCH is in a strong price uptrend and recently became overbought many times as the stock traded above the Upper Keltner Channel (circled in blue). As you can see, after trading above the Upper Channel in all scenarios, BMCH experienced a pullback.
Yet, even though BMCH experienced the pullbacks, the stock always continued to rally afterwards.
If you want to participate in this rally, where is the best place to enter?
We use the Keltner Channels to help us select a lower-risk entry point.
A Keltner Channel “Buy Zone” occurs when a stock is trading below the Upper Keltner Channel. Once the daily price is trading below the Upper Channel, it signals a buying opportunity.
If you had purchased BMCH shares when BMCH entered the “Buy Zone” around October 14th, you’d be up 22.82% on the stock by now.
Knowing that BMCH shares are continuing to rise, experience pullbacks, and rally again, we’ll be paying attention to future pullbacks in order to get in at the lowest entry point.
Maximizing Our Profit Potential
Additionally, we’d like to talk about how a previous Chart of the Day stock has done…
On January 20th, we highlighted D.R. Horton Inc. (NYSE: DHI), noting that DHI had been trading in a bullish trend since March.
If you happened to have purchased DHI shares on that day, you’d already be up 8.67%.
But… if you had purchased the right option contract, you would be up 166.7% in just a week’s time!
After just one trade!
In our elite research trading and training service. PowerTrend Options, chances like these are abundant. I firmly believe that choosing the right option can completely change your life.
In fact, that’s the whole thesis of that options research service — the right trade has the power to set you on the path to living the life of your dreams.
But we know that some people like to walk before they run… and so we designed a class just for them, called the Thunderbird Options Course. Complete with syllabus, videos, and quizzes. Check it out if you haven’t yet!
Editor, Chart Of The Day